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ABUJA— PRESIDENT Olusegun Obasanjo yesterday informed the Senate of government’s readiness to pay off Nigeria's last batch of outstanding debts owed the London Club amounting to $2.15 billion (N279.5 billion).

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In a letter to the Senate President dated May 24, 2006, President Obasanjo said his administration was following up its recent action in paying off the country’s debts to the Paris Club by settling the outstanding debts to the London Club of creditors.

Debts owed to the Paris Club are obligations to some foreign creditor nations, while the London Club of creditors is a grouping of institutional and private sector commercial debts. The London Club debts are made up of Promissory Notes, Par Bonds and associated Oil Warrants. President Obasanjo said these categories of debts were traded in the international market.

He said quite unlike the approach adopted in settling the Paris club obligations, a different approach taking the form of market-based transactions that would confer optimal financial and economic benefit to the country was being considered.

Praising the Senate for its co-operation in Nigeria’s ability to negotiate a favourable exit from the Paris Club debts, the President sought a similar co-operation in the administration’s latest effort towards offsetting the London Club debts.

In the letter, President Obasanjo also explained how and different phases involved in the settlement of the obligations to the Paris Club.

The letter: “The Senate leadership may recall that on October 20, 2005, Nigeria successfully negotiated a comprehensive debt treatment, allowing us to secure a full and permanent exit from the country’s Paris Club debts. Following the endorsement of the deal, the National Assembly appropriated the sum of $12.4 billion from the Consolidated Revenue Fund in November 2005 to finance the exit.

“As intimated to you on various occasions, the funds were sourced from excess crude savings, which had accrued in 2005, with the full consent of the stakeholders. The states concerned reimbursed their part of the balance to be paid to Paris Club.

“I am pleased to formally report to the Senate that the Paris Club debt deal has now been fully consummated and Nigeria is no longer indebted to Paris Club. May I seize this opportunity to, once again, thank the leadership and members of Senate for the support and co-operation provided to us in achieving this feat.

“In the spirit of transparency and accountability, I am also pleased to share with you details of the transactions that were carried out with the Paris Club. In accordance with the terms of the Agreed Minutes signed with Paris Club of Creditors in October 2005, the exit payments to the creditor countries were made in three phases and in various currencies, viz: US$, Euro, Pounds Sterling, Japanese Yen, Swiss Francs and Danish Kroner. Annex 1 provides details of the payments made by the country are indicated in Annex 2.

“You may wish to note that the dollar equivalent the payments referred to above under the three phases amounted to $12.09 billion, generating savings of about $306 million, as detailed in Annex2.

“These savings were realised on account of proactive exchange rate risk management conducted by the Central Bank of Nigeria and the Debt Management Office. In addition to the savings generated from proactive exchange rate risk management transactions, interest accrued on the account during the period amounted to about $605,000.00.

“It should, however, be noted that this amount does not include interest income accruing on monies deposited into the BIS Special Accounts opened for the creditors pending the signing of the bilateral agreements.

“In accordance with the Agreed Minutes, interests accruing on these Special Accounts were to revert to the respective creditors. The transactions cost amounted $30.24 million, which represents commission charged by the Central Bank of Nigeria for services rendered.

“On my intervention, the commission has been reduced from the normal one per cent charge levied by the Central Bank on government transactions to 0.25 per cent. The Bank for International Settlement (BIS), which managed the accounts used for channelling the payment, offered its services gratis, as is the traditional practice in relation to its role as the Banker of Central Bank.

“Taking into account the foreign exchange gains, interest income, transactions costs as well as administrative charges levied by CBN, I am pleased to report to the Senate that the actual cost to the nation of the Paris Club exit was $12,123,652,000 (i.e. approximately $12.12 billion). This represents net savings amounting to $276.3 million, in relation to the $12.4 billion payment negotiated with the Paris Club of creditors.

“I have instructed the Minister of Finance to return these savings to the excess crude account. With this step, I am happy to say that we have now put Paris Club behind us.

“With the successful conclusion of the Paris Club debt deal, I wish to intimate you that we have now turned our attention to the London Club category of debts,  made up of Promissory Notes, Par Bonds, and associated Oil Warrants.

“As these categories of debts are traded in the international markets, possessing different characteristics from Paris Club debts, a different approach is being adopted for their treatment. This is likely to take the form of a market-based transaction that will confer optimal financial and economic benefit to the country.

“We have invited proposals from reputable financial advisory services firms which will be competitively assessed to help us determine our strategic options. I will revert to the Senate as appropriate and will count on your support.”